Rates for Individual Producers (cont.)

The rate structure for an individual county is fairly simple. For a given crop and practice, the two key rating characteristics are Coverage Level and Rate Class. Coverage Level generally ranges from 0.50 to 0.75 in increments of 0.05. The rates for lower Coverage Levels are less than those for higher Coverage Levels since a low yield is less likely than a more normal yield. Rate Class represents a subdivision of the APH yield range. Studies have shown that producers with lower than average APH yields also have significantly higher variability of yield. Since MPCI coverage protects against lower than expected yields, these producers would have relatively greater losses than producers with average yields. For example, both a low yield and a high yield producer may purchase 75% Coverage Level, but the low yield producer is more likely to have a poor crop, resulting in more claims than the producer with the higher and more stable yield. For this reason, different Rate Classes are established for producers with different APH yields. The number of Rate Classes depends on the crop. For many crops, the APH range is generally subdivided into Rate Classes R01 through R09, with R05 representing the typical yield. The APH ranges corresponding to each Rate Class are determined by defining R01 as any yield below 50% of the average yield, defining R09 as any yield above 150% of the average yield, and defining the remaining Rate Classes using bands of equal width.

Other rate adjustments include a credit for insuring the producer's entire operation as compared to insuring individual fields and a credit for a Hail and Fire exclusion, which may be useful if the producer elects to purchase Crop Hail coverage in combination with MPCI. Disregarding these exceptions, the final MPCI premium is developed as the product of the appropriate rate, the Liability, and the Producer Premium Percentage Factor corresponding to the selected Coverage Level and Price Election Percentage.